A new golden decade? Interpretation of the merger plan of Geely Volvo

Why did the two parties not achieve a real merger? In fact, the answer to this question has long been “first draft”.
At the beginning of 2020, Geely and Volvo announced that they are discussing to promote business mergers. At that time, Li Shufu, chairman of Zhejiang Geely Holding Group, said: “The two sides discussed in-depth cooperation opportunities to achieve synergy within the group while maintaining the competitive advantage and integrity of each independent brand.”

Since then, due to the outbreak of the new crown pneumonia and the Geely Auto Science and Technology Innovation Board listing plan, the negotiation was temporarily delayed, and the negotiation process was not resumed until the beginning of this year. However, at that time, Hanken Samuelson, President and CEO of Volvo Car Group, had already revealed that “Volvo is looking for a merger, which can be achieved in a variety of ways, such as platform sharing. Geely has many suppliers in China, and (Volvo) can cooperate with these Suppliers start more cooperation.”
It can be seen that there seem to be differences between Geely and Volvo on the merger issue. The merger plan announced this time is also the final consensus reached by both parties after compromise.
Gui Shengyue, Chief Executive Officer of Geely Automobile Holdings Co., Ltd., responded very representatively. He pointed out, “The development of Geely Automobile in the past ten years is inseparable from the support of Volvo Cars. If the two parties can find a closer approach or a good merger plan based on the cooperation in the past ten years, then the synergy will be able to play a role. To the maximum, it can also have stronger competitiveness in the process of the’new four modernizations’.”

“If Volvo Cars and Geely Auto are integrated into listed companies in terms of equity, will shareholders’ equity be diluted? Will listed companies have a greater financial burden?” Gui Shengyue believes that this plan is the most The best merger plan is also the most responsible plan for all shareholders and investors of listed companies.
Perhaps “Brother Comfortable” Mr. Li Shufu finally wants to understand that even if the two companies choose to merge and integrate into a listed company, the label behind it is still “a large traditional automobile group.” At the moment, even if it is stronger than Toyota, its market value is vulnerable to new technology companies like Tesla.
For Geely Automobile, further cooperation with Volvo to achieve more technology sharing and reduce costs in the process of technology integration is its ultimate goal. At the same time, it is the common goal of both parties to establish a closer partnership and continue to maintain strong competitiveness on the road of the new four modernizations. Then, as for whether to merge or not, it is a compromise.
In 2010, Geely Automobile acquired all the shares in Volvo Cars for 1.8 billion US dollars. So far, the two parties have gone through more than 10 years. Looking at the road Geely and Volvo have traveled over the past decade, I have to say that they have played triumphantly.
In the past ten years, Volvo Cars has doubled its global sales and has developed into a global conglomerate. While sales in the European and American markets have grown across the board, sales in China have reached five times that of ten years ago. As Samuelson said, “Ten years ago, our state was completely different from now. Without Geely, Volvo would not have the market position in China today.”
Geely Automobile is also developing rapidly. Since 2017, Geely Automobile has won the top sales of Chinese brand passenger vehicles for four consecutive years. In October 2020, Geely Automobile’s global cumulative sales exceeded 10 million, becoming the first Chinese brand car company to achieve the production and sales of passenger vehicles exceeding 10 million.
The last decade can be said to be the golden decade between Geely Automobile and Volvo Cars. Whether it is technology integration, automobile production and sales, or market position, the two sides are all going hand in hand. Today, both parties are still looking forward to the emergence of the next golden decade.
So, how to start the next golden decade? An Conghui and Li Donghui gave almost the same answer: to establish a closer strategic coordination relationship. This sentence is not a mandarin sentence. Geely Auto and Volvo Cars benefit from close cooperation. Only closer cooperation will benefit more.
More importantly, in order to promote this cooperation, the two parties will also establish a new coordination and management mechanism to ensure the efficient and smooth development of various cooperation projects. Their expectation is to achieve the effect of “1+1>2” through closer collaboration.
The anticipated merger has not arrived. Could it be that the merger is really a lonely merger? We should not think this way. The two parties have not blocked the merger road. As Li Donghui revealed, Geely and Volvo have reached the best merger plan. Whether they will consider the real merger in the future will be based on the future of both companies. Development and market situation judgment. At least, Volvo Cars still has the opportunity to explore various options in the capital market.(More in autofun: harga daihatsu luxio baru)